Williams Sonoma 2Q16 Earnings Call Notes

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Williams­Sonoma’s (WSM) CEO Laura Alber on Q2 2016 Results

Retail environment has softened

“Despite this progress on our strategic initiative, the retail environment has softened since we last talked, and our sales are being impacted by a more cautious consumer. While we are confident in our long-term strategies across the company, we believe it is prudent to modify our outlook for the remainder of the year. Julie will provide more details about our guidance later in the call. As always, our focus is on what we can control, which includes our supply chain and inventory initiatives, delivering innovative products at the best value, our marketing strategies to increase new customer acquisition, and enhancing the retail experience.”

Digital has become our largest marketing channel

“In March, I spoke with you about how we would transform our marketing. One key area of focus is digital innovation. We’re seeing a transition in the marketplace that plays into our strengths and competitive advantages. We have advanced multi-dimensional attribution models that guide our investments and it has led us to surgically cut our catalog circulations to rebalance and to optimize our investments into digital channels as they continue to evolve. As a result, digital marketing has become our largest investment channel, outpacing our catalog and store-based marketing investments.”

Innovation in digital

“A big part of our digital story is our innovation. Our proprietary modeling, based on customer profiles and interactions, drives our ability to target audiences more effectively and profitably. We know that relevant marketing drives engagement with targeted audiences converting at 3x that of non-targeted audiences at half the cost. The breadth, depth, and detail in our house file provide us with a material advantage, and we are partnering with great companies to help to advance and take advantage of emerging personalization capabilities for custom segmentation and targeting. ”

Digital strategy does not include twitter

“While we leverage our existing marketing strategies for the parent, there are a number of digital-only tactics we use to capture the increasing purchase influence of the youth audience, including Facebook, Instagram, YouTube, and Snapchat.”

We know mall traffic’s down

“We know mall traffic’s down. Certain categories are more challenged than others. On the flipside, housing metrics appear to be strong, and we also are seeing growth in some of our smaller businesses. Our approach has always been the same. We’re going to focus on the things that we can control, and we would prefer to be self-critical.”

I’m not an economists so not going to go through the reasons

“I would say that it’s both. In retail, there’s reported reduced traffic from all the counter aggregate data you see. And then the customers’ just more careful right now. I’m not an economist, so I’m not going to go through all the reasons that could be.”

Customers are savvy

“Customers are savvy. As I said earlier, they know a value when they see one, including if it’s a higher price point type of item. So a sofa that’s a great value, maybe a lot more money than a candle. The truth of the matter though is that the candle a lot more people can afford. So, as I said earlier, we have to make sure that we are not just driving our furniture business but bringing in really innovative decorating and entertaining ideas into all of our brands. ”